The 30-year mortgage rate reaches highest level in 20 years.
Mortgage rates hit their highest level in over two decades, with the 30-year rate just a few basis points shy of 7%.
The popular 30-year fixed-rate mortgage resumed its ascent after a brief pause last week, up 26 basis points to 6.92% as of October 13. Freddie Mac chief economist Sam Khater said this is the highest the 30-year interest rate has been since April 2002.
The average 15-year fixed-rate mortgage rose from 5.90% last week to 6.09%, while the five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 5.81% – up from 5.36% a week ago.
“We continue to see a tale of two economies in the data: strong job and wage growth are keeping consumers’ balance sheets positive, while lingering inflation, recession fears and housing affordability are driving housing demand down precipitously,” Khater added. “The next several months will undoubtedly be important for the economy and the housing market.”
In September, the Bureau of Labor Statistics reported a 263,000 increase in nonfarm employment, a modest deceleration from the 315,000 job gains in August. According to Fannie Mae, the drop in the number of job openings indicates labor demand may be starting to come into better balance with supply.
“We anticipate this trend to continue and see this as consistent with our current forecast of a recession likely occurring in the first quarter of 2023, as well as an end to the Fed’s policy tightening sometime thereafter,” Fannie Mae said in its latest forecast. “In the near term, we continue to expect further tightening past the end of 2022.”
“Of course, the slowing effect on the housing market of the higher mortgage rate environment has been largely predictable, and home prices appear to have already begun trending downward,” said Doug Duncan, chief economist of Fannie Mae. “Looking ahead to the full year 2023, on a national basis, we expect an average home price decline of 1.5%. Given the ongoing tension between potential homebuyers and home-sellers at the moment, we believe the pace of sales is likely to slow even further, too.”